Bucking the China Odds: Mead Johnson Nutrition CO (MJN)

In its South American operations, Mead Johnson has facilities in Columbia, Argentina, Brazil, Peru, Ecuador, and Venezuela. Besides China, the company also has operations in the Asian emerging markets of Malaysia, Indonesia, and Vietnam, as well as in Thailand and the Philippines where Mead Johnson has manufacturing facilities.

It is in China where Mead Johnson clearly established its superiority against Nestle and Pfizer Inc. (NYSE: PFE), two other major foreign players in the Chinese infant nutrition market. Pfizer last year divested its infant nutrition business and sold it to Nestle. The latter, in effect, was merely buying market share when it gained 9.8 percent slice of the Chinese market following the acquisition. Nonetheless, Nestle still trailed Danone and Mead Johnson in the Chinese infant formula market derby with market shares of 9.8 percent and 11.7 percent, respectively. As a result of its divestment, Pfizer’s adjusted earnings per share dropped 4 percent to 47 cents in the 2012 fourth quarter. In comparison, Mead Johnson EPS in the same quarter rose to 66 cents from 42 cents a year earlier.

Final Say

In summation, Mead Johnson appears a solid stock choice for this year. The company forecast 2013 earnings of $3.22 to $3.30 per share, excluding special items, and sales growth of between 6 percent and 7 percent. For this year, it will draw strength from operational improvements and cost controls that have been set in place, including those that enabled successful reduction of distributor inventory in China.

The article Bucking the China Odds originally appeared on Fool.com and is written by Renia Bula.